JAKARTA – The World Trade Organization’s (WTO) ruling on countervailing import duties of biodiesel that favours Indonesia in the trade dispute with European Union (EU) is potential to open bigger access for Indonesian palm oil exports to the European market. But the environmental requirements set by EU in its EU deforestation regulation (EUDR) could also become an obstacle for the Indonesian palm oil exports if producers fail to comply with the requirements.
The Indonesian Palm Oil Association (GAPKI) Chairman Eddy Martono said that the WTO ruling has given a positive signal as it is potential to annihilate non-tariff barriers to export of biodiesel, as a derivative product of Indonesian palm oil.
“The WTO decision means that non-tariff barriers on palm oil can be eradicated, but with a condition that EU will accept the decision and won’t file an appeal against the ruling,” Eddy was quoted by Kompas as saying in Jakarta on Monday.
The trade dispute on the countervailing import duties of biodiesel from Indonesia has been going on since 2023, when EU imposed extra import duties on biodiesel from a number of Southeast Asian countries, including Indonesia. The EU Commission said that Indonesian government gave indirect subsidy to the biodiesel industry through export tax policy, export levy, and intervention in determining prices.
According to EU, such practice has made the raw material for Indonesia’s biodiesel product cheaper, harming the biodiesel industry in Europe. But the accusation has been rejected by the WTO panel after a long process of assessment.
The latest report of WTO panel published in early January 2025 stated that EU is proven to discriminate against palm oil and its derivative products. EU takes unfavourable action against palm-based biodiesel from Indonesia if compared to other biodiesel products based on other vegetable oils, such as rapeseed and sunflower.
But according to Eddy, currently the biodiesel export from Indonesia to EU is no longer that big. It is because the implementation of the Indonesian government’s mandatory program of biodiesel, which has been continually rising and must be prioritized for local market.
On the other side, EU has now started the production of biodiesel with the use of used cooking oil (UCO) from sunflower, soybean and palm oil.
But now the ruling of WTO Panel will open bigger access for palm oil-based biodiesel from Indonesia in the European market. It is also potential to raise exports of palm oil products to the EU market.
“We warmly welcome the WTO ruling. It has proven that the accusation of EU against Indonesian biodiesel is not true. The government’s policy regarding the biofuel mandatory program in Indonesia does not violate the principles of international trade as stipulated by the WTO,” said Eddy.
Eddy said that actually Indonesia’s position has been getting stronger after the government finalized the economic agreement under the Indonesia – European Union Comprehensive Economic Partnership Agreement (IEU-CEPA), which had been stalled for almost one decade. Through the agreement, all tariff barriers are expected to be eradicated, so that palm oil and derivative products can be more competitive in the European market.
But despite the fact, Eddy reminded that sustainability of Indonesia’s exports of palm oil and derivative products to EU will still be determined by compliance with the EUDR that will be implemented by EU since 30 December 2025 for companies and since 30 June 2026 for smallholders.
“Our palm oil exports to Europe will only increase if we comply with the EUDR. The government needs to pay serious attention to this issue to ensure that our palm oil exports will not be hindered by the EUDR,” he said.
Meanwhile, Trade Minister Budi Santoso has stated that the WTO ruling that favours Indonesia has proven that Indonesia is committed to implementing the principles of fairness in international trade.
But he reminded that intensive diplomacy should be continually pursued to prevent the EUDR not becoming a new obstacle to Indonesian palm oil and derivative products.
“Indonesia is the trade strategic partner of EU. We hope that this approach will make their anti-deforestation policy more flexible on the environmental requirements,” said Budi. (*)
